In order to remedy the risk of fraud, the fraud exception is recognized by the law of letters of credit outside the UCP. Under this rule, the bank is allowed to reject payment even if the documents on their face comply with the terms and conditions of the letter of credit, when documents are found to be fraudulent. This paper revisits the United City Merchants case which has established an ‘exception from exception’ rule by excluding from the application of the fraud exception rule cases in which the fraud was not committed by the beneficiary. This case has provoked a live debate, a lot of controversy, and different opinions. The paper will provide a short comparative overview to illustrate different approaches taken by different jurisdictions. The primary objective of this chapter is to contribute to the ongoing debate by bringing some new arguments aimed at highlighting the potential problems regarding the ‘exception from exception’ rule.